CLDT

Market Demand Trends

• Management believes the U.S. lodging industry is in the early stages of a prolonged upcycle, supported by favorable supply-demand dynamics. Business travel drives 75% of Chatham's EBITDA, and small-to-medium business (SMB) transient travel growth is outpacing large corporate growth, which benefits Chatham's upscale and mid-scale hotel portfolio.
• The recently acquired Midwest 6-hotel portfolio is outperforming expectations, supported by new large-scale investment in a regional data center project that will create 600 permanent jobs and add incremental hotel demand.
• Silicon Valley is seeing a strong tech-driven travel resurgence, with major tech companies including Databricks, Amazon, and OpenAI leasing millions of square feet of new office space near Chatham's four hotels, driving strong double-digit demand growth from top tech clients.

Supply Dynamics & Development

• Construction costs remain very high, limiting new hotel development to only a small number of high-demand niche markets, which benefits existing hotel owners via pricing power. Chatham has broken ground on a new 130-suite Home2 Suites development in Portland, Maine adjacent to an existing property.
• Total construction costs for the Portland development are expected to be $45 million ($350,000 per key), with net basis reduced by the planned sale of 5,500 square feet of attached commercial space. The hotel is projected to open in summer 2028, with an expected unlevered stabilized year-two yield of 11% and will be accretive to earnings upon opening.

Capital Allocation

• Chatham repurchased $3 million of common stock in Q2 2026, bringing total repurchases to $18 million out of a $25 million authorized plan. Since inception in May 2025, 2.5 million shares (≈5% of outstanding shares/units) have been repurchased at an average price of $7.29 per share, representing a 50% discount to current market valuations. Repurchases have been paused after the recent share price rebound.
• One small hotel is currently being marketed for sale, with expected proceeds of less than $20 million; a closing announcement is expected in Q3 2026. CapEx spending was $7 million in Q2, with a full-year 2026 budget of $27 million, and three hotels scheduled for renovation in the second half of 2026.

Operational Performance

• Overall portfolio achieved a 46.8% GOP margin and 40.8% Hotel EBITDA margin in Q2 2026. Excluding a 2025 one-time workers' compensation benefit, GOP margins increased 170 bps and Hotel EBITDA margins increased 330 bps year-over-year, with 60% revenue flow-through to margins.
• Non-room operating profits grew 13% ($400,000) year-over-year in Q2. On a per-occupied-room basis, department expenses fell nearly 1% year-over-year, and total hotel operating expenses grew only 2%. Labor productivity improved significantly: Q2 occupied rooms rose 13% quarter-over-quarter, while headcount only increased 4%, and 2026 annual employee pay increases averaged just 2.5%.
• Balance sheet remains very strong, with a 31.2% leverage ratio as of Q2 end and $225 million in available capacity under the company's revolving credit facility.

• Management increased full-year 2026 guidance following the strong Q2 beat, with cumulative guidance up ~20% since the start of 2026. The guidance incorporates intentional conservatism for the second half of 2026 amid near-term uncertainty from the Iran conflict.
• Full-year 2026 guidance: 1.5% to 3% RevPAR growth, adjusted EBITDA of $99.2 million to $102.3 billion, and adjusted FFO per share of $1.28 to $1.34.
• Q3 2026 RevPAR is expected to grow approximately 4% year-over-year, with management assuming low single-digit RevPAR growth for the September to December 2026 period in line with Hilton's non-luxury segment projections.

Chatham Lodging Trust breaks its 39-hotel portfolio into 5 operating segments weighted by EBITDA contribution:

1. Business travel-focused core portfolio: Accounts for ~75% of total company EBITDA. Q2 2026 overall portfolio RevPAR grew 3.3% year-over-year, accelerating to 9.7% in July. Excluding World Cup impacts, core RevPAR still grew 3% in Q2.
2. Silicon Valley hotels: Accounts for 17% of total company EBITDA. Q2 2026 RevPAR grew 7% year-over-year to a 6-year high of $164, with ADR up 10% to $212; July 2026 RevPAR accelerated 26% across all four hotels, with the two Sunnyvale hotels up 41%. Non-renovated Silicon Valley hotels delivered Hotel EBITDA growth of 29% year-over-year on 9% RevPAR growth, with GOP margins of ~51% (400 bps above portfolio average).
3. Predominantly government-oriented hotels (all in greater DC): Accounts for 9% of total company EBITDA. Q2 2026 RevPAR grew 9% year-over-year, matching Q1 2026 growth, with Springfield Embassy Suites up 14% and Tyson's Corner hotel up 13%.
4. Convention hotels: Q2 2026 RevPAR declined 5% year-over-year, driven by a softer 2026 convention calendar and ongoing convention center renovations in Texas. Dallas Courtyard RevPAR was down 3% (a meaningful improvement from 26% decline in Q1), and Austin hotels saw RevPAR down less than 3%.
5. Predominantly leisure hotels: Q2 2026 RevPAR grew ~0.5% year-over-year. Savannah Spring Hill Suites grew 9% post-renovation, while Hilton Garden Inn Portsmouth saw an 8% decline due to Canadian travel softness from wildfires and new competing supply. Recently acquired 6-hotel Midwest portfolio (closed March 2026): Delivered $3.2 million in Q2 2026 Hotel EBITDA, with 8.6% RevPAR growth. Q2 occupancy hit 83% (200 bps above portfolio average), with 49.3% GOP margins; July 2026 RevPAR jumped 13% to 86% occupancy.

• Near-term travel demand visibility is limited beyond one to two months due to geopolitical uncertainty from the ongoing Iran conflict, which could create choppy near-term operating results.
• A softer 2026 convention calendar and ongoing convention center renovations in Texas have negatively impacted convention hotel RevPAR, though comps are expected to improve in the second half of 2026.
• Some Silicon Valley hotels still have meaningful upside to recover to pre-pandemic RevPAR levels, with the two Sunnyvale hotels currently ~18% below 2019 RevPAR.

Q: Beyond labor, what other expense categories are seeing cost improvements from Chatham's expense management efforts?

A: Chatham has secured property tax refunds from prior years at several hotels, with additional refunds expected going forward. Property insurance was renewed at the start of 2026 for a ~10% full-year cost reduction. The company has secured competitive long-term fixed-rate contracts for utilities to mitigate gas and electricity price volatility. Repair and maintenance costs are also down year-over-year, following heavy investment in prior years, supporting margin expansion.

Q: Where will the proceeds from the upcoming small hotel sale go, and is the sale included in current guidance?

A: The sale is not included in 2026 guidance, as Chatham only updates guidance once a sale closes. Short-term proceeds will be used to pay down outstanding balances on the company's revolving credit facility.

Q: What is driving July's very strong 10% RevPAR growth, and is there anything unusual about the year-over-year comparisons?

A: A large portion of the gain comes from Silicon Valley, which had easier year-over-year comps after Chatham declined a large client's pricing cut request that suppressed Q3 2025 results. Even so, the 26% July RevPAR growth in Silicon Valley (41% for the two Sunnyvale hotels) far outperformed underwriting, driving strong portfolio-level results.

Q: What is driving the positive long-term outlook for Chatham, and what is the acquisition market outlook?

A: Strong long-term performance is driven by favorable supply-demand: very low new hotel construction starts post-pandemic combined with rising GDP and manufacturing growth, giving existing hotels strong pricing power as occupancy nears historical peak levels. On acquisitions, the transaction market is expected to improve in the second half of 2026 as positive RevPAR trends encourage more owners to sell assets, and Chatham will continue to compare acquisition yields against alternative capital uses like share repurchases.